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Exhibit 5(i)
FORM OF INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of _______, 1998 between Xxxxxxx
Xxxxx Variable Series Funds, Inc., a Maryland corporation (the "Company"), and
Xxxxxxx Xxxxx Asset Management, L.P., a Delaware limited partnership (the
"Adviser");
W I T N E S S E T H:
WHEREAS, the Company is engaged in business as a diversified
open-end management investment company and is registered as such under the
Investment Company Act of 1940 (the "Investment Company Act"); and
WHEREAS, the Company is currently comprised of [sixteen]
separate Funds, each of which pursues its investment objective through separate
investment policies; and
WHEREAS, the Adviser is engaged in principally in rendering
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940; and
WHEREAS, the Adviser is currently serving as the Investment
Adviser to the Company's Reserve Assets Fund pursuant to an Investment Advisory
Agreement dated November 10, 1981 as amended on April 23, 1985; to the Company's
Prime Bond Fund, High Current Income Fund, Quality Equity Fund and Equity Growth
Fund pursuant to an Investment Advisory Agreement dated April 21, 1982 as
amended on April 23, 1985; to the Company's Natural Resources Focus Fund and
American Balanced Fund pursuant to an Investment Advisory Agreement dated April,
1988; and to the Company's Domestic Money Market Fund and Global Strategy Focus
Fund pursuant to an Investment Advisory
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Agreement Dated October 16, 1991; to the Company's Basic Value Focus Fund,
Global Bond Focus Fund (formerly known as the World Income Focus Fund), Global
Utility Focus Fund and International Equity Focus Fund pursuant to an Investment
Advisory Agreement dated June, 1993; to the Company's Developing Capital Markets
Focus Fund and Government Bond Fund (formerly known as the Intermediate
Government Bond Fund) pursuant to an Investment Advisory Agreement dated April,
1994; and to the Company's Index 500 Fund pursuant to an Investment Advisory
Agreement dated December, 1996.
WHEREAS, the Company desires to retain the Adviser to render
investment supervisory and corporate administrative services to the Company's
Global Growth Focus Fund and the Company's Capital Focus Fund (each a "Fund,"
and together the "Funds"), in the manner and on the terms hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the Company and the Adviser hereby agree as
follows:
ARTICLE 1.
Duties of the Adviser.
The Company hereby employs the Adviser to act as the
investment adviser to and manager of the Funds and to manage the investment and
reinvestment of the assets of the Funds, and to administer its affairs, subject
to the supervision of the Board of Directors of the Company, for the period and
on the terms and conditions set forth in this Agreement. The Adviser hereby
accepts such employment and agrees during such period, at its own expense,
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to render the services and to assume the obligations herein set forth for the
compensation provided for herein. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Company in
any way or otherwise be deemed an agent of the Company.
(a) Investment Advisory Services. In acting as investment
adviser to the Funds, the Adviser shall regularly provide the Funds with such
investment research, advice and supervision as the latter may from time to time
consider necessary for the proper supervision of the Funds and shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Funds' portfolio shall be held in the various securities in which it may
invest, subject always to the restrictions of the Company's Articles of
Incorporation and ByLaws, as amended from time to time, the provisions of the
Investment Company Act and the statements relating to the Funds' investment
objectives, investment policies and investment restrictions set forth in the
currently effective prospectus of the Company relating to the Funds under the
Securities Act of 1933 (the "Prospectus"). Should the Board of Directors of the
Company at any time, however, make any definitive determination as to the
investment policy of the Funds and notify the Adviser thereof, the Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination has been revoked. The
Adviser shall take, on behalf
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of the Company, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders for
the purchase or sale of portfolio securities for the Funds with brokers or
dealers selected by it. In connection with the selection of such brokers or
dealers and the placing of such orders, the Adviser is directed at all times to
seek to obtain for the Funds the most favorable net results for the Funds as
determined by the Board of Directors and set forth in the Prospectus. Subject to
this requirement and the provisions of the Investment Company Act, the
Securities Exchange Act of 1934, and other applicable provisions of law, nothing
shall prohibit the Adviser from selecting brokers or dealers with which it or
the Company is affiliated.
(b) Administrative Services. In addition to the performance of
investment advisory services, the Adviser shall perform, or supervise the
performance of, administrative services in connection with the management of the
Company insofar as such services relate to and are required by the Funds. In
this connection, the Adviser agrees to (i) assist in supervising all aspects of
the Company's operations relating to the Funds, including the coordination of
all matters relating to the functions of the custodian, transfer agent, other
shareholder service agents, accountants, attorneys and other parties performing
services or operational functions for the Company relating to the Funds, (ii)
provide the Company, at the Adviser's expense, with services of persons
competent to perform such administrative and clerical functions as are necessary
in order to provide effective
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administration of the Company to the extent required by the Funds, including
duties in connection with shareholder relations, reports, redemption requests
and account adjustments and the maintenance of certain books and records of the
Company insofar as they relate to the Funds, and (iii) provide the Company, at
the Adviser's expense, with adequate office space and related services necessary
for its operations as contemplated in the Agreement.
ARTICLE 2.
Allocation of Charges and Expenses.
(a) The Adviser. The Adviser assumes and shall pay for
maintaining the staff and personnel, and shall at its own expense provide the
equipment, office space and facilities, necessary to perform its obligations
under this Agreement, and shall pay all compensation of officers of the Company
and the fees of all directors of the Company who are affiliated persons of
Xxxxxxx Xxxxx & Co., Inc. or its subsidiaries, and shall pay the organization
costs of the Funds.
(b) The Company. The Company assumes and shall pay all
expenses of the Funds, including, without limitation: insurance, taxes, expenses
for legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports and prospectuses (except to the extent paid by the
Distributor), charges of the Custodian and Transfer Agent, expenses of
redemption of shares, Securities and Exchange Commission fees, expenses of
registering the shares under federal and state securities laws, fees and
expenses of directors who are not affiliated persons of Merrill
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Xxxxx & Co., Inc. or its subsidiaries, accounting and pricing costs (including
the daily calculation of net asset value), interest, brokerage costs, litigation
and other extraordinary or nonrecurring expenses, and other expenses properly
payable by the Company.
ARTICLE 3.
Compensation of the Adviser.
(a) Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Adviser, the Company shall pay
to the Adviser at the end of each calendar month a fee at the annual rate of
0.75% of the average daily net assets of the Global Growth Focus Fund and 0.60%
of the average daily net assets of the Capital Focus Fund, as determined and
computed in accordance with the description of the method of determination of
net asset value contained in the Prospectus.
(b) Expense Limitations. In the event the operating expenses
of the Funds, including the investment advisory fee applicable to the Funds
payable to the Adviser pursuant to subsection (a) hereof, for any fiscal year
ending on a date on which this Agreement is in effect, exceeds the expense
limitations under state securities laws or published regulations thereunder, as
such limitations may be raised or lowered from time to time, the Adviser shall
reduce its investment advisory fee by the extent of such excess and, if required
under any such laws or regulations, will reimburse the Funds in the amount of
such excess; provided, however, to the extent permitted under law, there shall
be excluded from such expenses the amount of any interest, taxes, brokerage
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commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Company and allocated to the Funds. Whenever the
expenses of the Funds exceed a pro rata portion of the applicable annual expense
limitations, the estimated amounts of reimbursement under such limitations shall
be applicable as an offset against the monthly payment of the advisory fee due
to the Adviser.
ARTICLE 4.
Limitation of Liability of the Adviser.
The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with any
investment policy or the purchase, sale or redemption of any securities on the
recommendation of the Adviser. Nothing herein contained shall be construed to
protect the Adviser against any liability to the Company or its security holders
to which the Adviser shall otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties on
behalf of the Company, reckless disregard of the Adviser's obligations and
duties under this Agreement or the violation of any applicable law.
ARTICLE 5.
Activities of the Adviser.
The services of the Adviser under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render
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similar services to others so long as its services hereunder are not impaired
thereby. It is understood that directors, officers, employees and shareholders
of the Company are or may become interested in the Adviser, as directors,
officers, employees or shareholders or otherwise and that directors, officers,
employees or shareholders of the Adviser are or may become similarly interested
in the Company, and that the Adviser is or may become interested in the Company
as shareholder or otherwise.
ARTICLE 6.
Duration and Termination of this Agreement.
This Agreement shall become effective as of the effective date
of the Company's Post Effective Amendment No. 29 to its Registration Statement,
and shall remain in force until the second anniversary of such effectiveness and
thereafter, but only so long as such continuance after the second anniversary is
specifically approved at least annually by (i) the Board of Directors of the
Company, or by the vote of a majority of the outstanding shares of the Funds,
and (ii) a majority of those directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purposes of voting on such approval.
This Agreement may be terminated at any time, as to the Funds,
without the payment of any penalty, by the Board of Directors of the Company or
by vote of a majority of the outstanding shares of the Funds, or by the Adviser,
on sixty days'
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written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
ARTICLE 7.
Definitions.
The terms "assignment", "affiliated person" and "interested
person", when used in this Agreement, shall have the respective meanings
specified in the Investment Company Act. As used with respect to the Company or
the Funds, the term "majority of the outstanding shares" means the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
ARTICLE 8.
Amendments of this Agreement.
This Agreement may be amended by the parties only if such
amendment is specifically approved by (i) the Board of Directors of the Company,
or by the vote of the majority of outstanding shares of the Funds, and (ii) a
majority of those directors of the Company who are not parties to this Agreement
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.
ARTICLE 9.
Governing Law.
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The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
XXXXXXX XXXXX VARIABLE SERIES FUNDS,
INC.
ATTEST:
By:
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President
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Secretary
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By Princeton Services, Inc., its
general partner
ATTEST:
By:
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President
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Secretary
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